Warabeya Nichiyo Holdings' (TSE:2918) Dividend Will Be ¥45.00

Warabeya Nichiyo Holdings Co., Ltd. (TSE:2918) will pay a dividend of ¥45.00 on the 15th of November. The dividend yield will be 3.5% based on this payment which is still above the industry average.

See our latest analysis for Warabeya Nichiyo Holdings

Warabeya Nichiyo Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Warabeya Nichiyo Holdings' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 12.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Warabeya Nichiyo Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥35.00 in 2014, and the most recent fiscal year payment was ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Warabeya Nichiyo Holdings has seen EPS rising for the last five years, at 48% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Warabeya Nichiyo Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Warabeya Nichiyo Holdings that investors should take into consideration. Is Warabeya Nichiyo Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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